Examination of Witnesses (Questions 400-410)
Dr Supachai Panitchpakdi
10 JULY 2008
Q400 Lord Moser: In other words,
at the top of the tree there are the postgraduates, the really
well-off ones, and at the bottom of the group are the LDCs, the
non-graduates, and some of them are graduating. My question was,
are the graduates and postgraduates helping the non-graduates
enough. You have answered the postgraduates, yes, but there is
the middle ground of a lot of countries which have graduated from
the bottom who in your view are not doing their bit. Does that
go too far?
Dr Supachai: I was speaking more of the
assistance between the advanced countries and the least developed
countries. If you are talking about the middle-income developing
countries, at the moment it seems there would be increasing economic
cooperation within the South—that is, among developing countries.
There are developing countries that are now helping the LDCs.
For example, the other day India made an announcement during the
summit meeting between the leaders of India and Africa that it
will give quota-free, tariff-free market access to the LDCs. We
are seeing more assistance among these countries from different
layers.
Q401 Lord Moser: Finally, very briefly,
the Aid for Trade Fund, which is a very big operation, does that
cause any problems in terms of the LDCs possibly feeling that
they cannot negotiate fairly?
Dr Supachai: The fund that is supposed
to be helping the LDCs is called the Integrated Framework. I do
not know whether you have heard of that.
Q402 Lord Moser: Yes.
Dr Supachai: At the moment it has been
improved and now we call it the Enhanced Integrated Framework,
the EIF: enhanced in a way that there will be a larger amount
of funds, that they will be more predictable, that there will
be greater ownership and more harmonisation work with the domestic
development strategy. This is called the Enhanced Integrated Framework.
The EIF is directed mainly at the LDCs. Its main task is to help
in the mainstreaming of trade policies into the overall poverty
reduction strategy. As you know, the World Bank, IMF and donors
base their donation of funds on the poverty reduction strategy
that mostly has been established by the World Bank. There has
been a proposal from our side, from the WTO and UNCTAD, that if
you do only development without trade that is not sufficient,
so the EIF is supposed to help mainstream trade into development.
Aid for Trade came later; it was developed during the time I was
at the WTO. It was agreed when I had just left the WTO in 2005
at the Hong Kong Ministerial. It is now three years without Aid
for Trade being operationalised. There has been a lot of discussion
on conceptual frameworks. It has very commendable targets to help
make adjustments, to help implementation of the trade rules, to
help build up supply capacity, to help trade infrastructure and
things like that. I would say that most of the things that are
incorporated in Aid for Trade, 80 per cent, is work that we are
doing under the UNCTAD umbrella. I was part of the effort to help,
and the one thing I saw in the Uruguay Round, the Round preceding
Doha, was, the Trade-Related Intellectual Property Rights Agreement
(TRIPS) for example, which was one of the most difficult sets
of rules that developing countries were obliged to adopt, and
there was no assistance to them at all. As a result it did not
create the benefits that developing countries should have enjoyed
from being part of that agreement. So Aid for Trade was conceived
to make the participation in the trade negotiation amenable for
the poor countries to take up, to feel part of and implement.
If they finish the Doha Round this year, there will be maybe 10
new agreements on the cards and it will take a lot of money and
resources to implement them all. Aid for Trade is supposed to
be for that purpose. At UNCTAD we say that Aid for Trade is something
we have been doing all along. If more support can be given to
the work we are doing, we can start doing more work on Aid for
Trade now, particularly in assisting countries in the ongoing
negotiations. They badly need assistance on the negotiations,
especially on complicated subjects like services, which is the
one of the most intractable parts of the negotiations. Aid for
Trade at the moment is not operationalised, and I keep asking
about it; it has been three years now. The fear we have—and
I do not know whether you should keep it in or out—is it
might be linked to the outcome of the Round. It might be used
as a sweetener—"If you agree on this, I give you that"—which
is not what we want. We have rejected that, and have asked the
European countries to reject it as well. Of course, donor countries
and advanced countries are saying that this is not the purpose,
but if you look at the way this is being approached you must have
some suspicions about the reason for the delay. It could have
been operationalised a few years ago, right after the Hong Kong
meeting in 2005. Maybe the end is in sight, but I am sure Aid
for Trade will be targeted to be implemented at a time when the
whole single package is adopted.
Q403 Lord Trimble: Obviously issues
concerned with UNCTAD, WTO, the meeting here in a week or so's
time, are very much our concern, but as a Committee our focus
should be on the European Union. I wonder if I could ask you to
think about the trade policy of the European Union and whether
you think there are any aspects of that that are particularly
helpful or harmful for the less developed countries.
Dr Supachai: Thank you, Lord Trimble.
They have given me long notes. I will not read all of this to
you. I would summarise by saying I understand why agriculture
policy has to be one of the key policies within the EU, but I
hope that the EU also understands that by subsidising production
and exporting products that have price distortions—meaning
lower prices than the normal cost of production—that results
in the destruction of agricultural initiatives. It has created
a lot of disincentives around the world for farmers to remain
attached to their investment. I would say in all areas of government
support—agriculture subsidies, blue box, amber box, price
support, price guarantee, export credits, food aid in kind—all
of this has resulted in a distorted price mechanism, and this
is a major culprit within the EU system. I know that the EU is
working towards reforming the whole system to move everything
into the so-called green box. The green box is a box in which
the expenditures on agriculture are permissible. It is supposed
to help in the transportation of food, research, extension services,
and so on. Negotiations going on at the moment in the WTO are
also engaged on the right definition for the green box, because
people are afraid that countries might be taking this kind of
action in moving actionable subsidies from the blue box and amber
box into the green box. There are other things that have been
somewhat harmful to the export potentials of the European countries,
mainly in some of the key non-tariff areas, which are also under
negotiation at the WTO on both sides, on the technical barriers
and also the sanitary and phytosanitary barriers, particularly
on food safety requirements. Most of the time all of this standard-setting
has been driven by the private sector, and the governments in
the EU allow them to do so. All the retail firms have their own
sets of rules. This is quite harmful, because they set their own
standards, and sometimes the standards in the rest of the world
are quite safe but do not comply with these standards. Representatives
of the European countries are not always involved in the setting
of these standards because these are private initiatives. From
UNCTAD's side, we now have a taskforce that deals with the issues
of non-tariff barriers, because we would like to see them being
tackled more than before. If you look beyond agriculture, in manufacturing
the tariffs are very low at the moment. The only problem with
a protection policy in manufacturing is the non-tariff barriers,
so we would like to deal with that. One area which is neither
negative nor positive, but just a warning: I know the EU is making
an effort to finish the negotiations on the Economic Partnership
Agreements, the EPAs. I worked a lot with Africa and understand
that some of our African colleagues are feeling under pressure,
to put it diplomatically. I have attended a number of meetings
at which African trade ministers have discussed their role in
the negotiation on the EPAs. It seems that EPAs would cover areas
that we call WTO Plus, for example in some of the TRIPS areas,
investment and government procurement. I told the African ministers
it is up to them: "If you want to go ahead, you go ahead
but, according to the WTO arrangement, you are not bound to do
that". The second point is the way the EU, I think with good
intentions, was trying to clinch the deals by the end of last
year because a waiver was supposed to have expired then to give
special concessions to the ACP countries. Before the end of last
year there were, I would say, some contrived agreements for some
countries that have resulted in the current divisiveness. If you
look at the western part of Africa, only Ghana and one or two
other countries have signed the interim agreement but the rest
have been very vocal against this EPA agreement. In southern Africa,
South Africa has not joined in. In eastern Africa they have all
joined in. What resulted in Africa was a threat to the regional
integration of Africa, which I know is not the purpose of the
EU EPA. The EPA is supposed to help with the economic integration
of Africa. My warning is that this may not result in economic
integration because the Africans have to reconcile what they have
done, and some have acceded to the agreement and some have not.
This is a real problem. The few good things that I think the EU
has been doing, and probably should do more of, is first in the
area of Everything But Arms, the special concession that has been
given to the LDCs. I hope that the three commodities which were
left out from the beginning, which were rice, bananas and sugar,
will eventually be integrated into Everything But Arms. The second
is the GSP scheme that the EU has adopted, the General Scheme
of Preferences, except that the scheme is under some conditionalities.
It used to be explained by the EU that these conditionalities
are tied to the labour question, but I do not know. It might be
correct from the side of the EU to try to help promote labour
rights adoption, but from the recipient countries the conditional
concession might not be 100 per cent useful. The third part of
assistance from the EU is in the area of standard recognition.
I was talking about the problem with NTBs, but at the same time,
the EU has been doing a lot of work in helping countries to understand
the need for standardisation work and to have mutual recognition
of standards to try to upgrade their products so they meet international
standards.
Q404 Lord Trimble: On your first
point, commenting on the Common Agricultural Policy, speaking
personally I am not favourably disposed towards that particular
policy myself but I have heard it said that if Europe were to
abolish CAP the benefit would go mainly to the developing countries,
such as Brazil, and very little benefit would actually go to the
less developed countries. Would you agree with that?
Dr Supachai: I would say that this would
be a correct assessment.
Q405 Lord Trimble: You still think
that, nonetheless, it would be a good idea to remove CAP?
Dr Supachai: In the first round, certainly.
This is true with everything in economic life in this world. Those
who are efficient in car manufacturing would gain from the car
negotiations, in textiles they would gain in textiles. This is
why trade liberalisation is there, for countries to take action
to try to specialise in certain areas and take benefits. Some
countries specialise in food production so these are the countries
that would stand to gain quite a lot in the first round. As a
result of this, in the second round we would see a better pricing
system, and this is what we are all aiming for. You cannot avoid
having Brazil, Argentina, Thailand, countries like this, gain
from this first round from the liberalisation of prices, but when
a pricing mechanism is fully free I believe that more countries
will join in agricultural production with more investment.
Q406 Lord Maclennan of Rogart: The
Doha Round has taken a long time to get to this point and, whatever
the outcome, it does raise questions about the effectiveness of
this particular mechanism of multilateral negotiations to deliver,
and perhaps particularly to the least developed countries, notwithstanding
the high reputation of the WTO, for example, in the sphere of
dispute settlement. From your vantage point, and with your experience
of the WTO, do you consider that post this round, and perhaps
I should say even before the end of it if it is protracted, we
should be thinking about new structures of decision-making, recognising
that also in the context of the explosion, as another witness
said, of bilateral negotiations? What is your thinking about the
future of the WTO in short?
Dr Supachai: This is a subject very close
to my heart. I left this document with the WTO, The Future
of the WTO. I asked Peter Sutherland to head it. I could not
put my name on it as at the time I was the Director-General. This
document shows how concerned I have been with the future of the
World Trade Organisation. Let me discuss the ongoing round of
negotiations. The Uruguay Round started in 1986 and was completed
in 1994, so it took us about eight years. It took us from 1994
to 2001, another six years, before we could launch another round.
You can see a cycle of eight years to finish a round and another
six years, a cycle of close to 15 years. It is 14 years from the
beginning of the launch of the Uruguay Round in Punta del Este
to the launch of the Doha Round in Qatar in 2001. If we do it
like this for the world, although negotiations last eight years,
implementation and going to the next round will take a cycle of
15 years, and I do not think the global economy will benefit from
this kind of very long cycle of launching of rounds. When we launched
the Uruguay Round there were less than 80 members of GATT, and
now we have 153 members of the WTO. During the Uruguay Round there
were very few issues, mainly manufacturing. Agriculture was dealt
with just a little bit in the Uruguay Round. There were new issues
on services and intellectual property rights, the TRIPS. In this
round there are more than 15 issues, new and old, to be handled.
It has taken about seven to eight years, close to the average
for the round to be completed and that is why people think that
before too long we will see the completion of the round. The process
of multilateralism is long, arduous and tortuous, and this should
not be the way for the future work of the WTO. I do not know whether
I should place it on record or not, but I intend to write a book
on why we should change from a multilateral round to something
that is more in line with the new rules of the WTO. During the
GATT period you could not have trade negotiations without a round
because the GATT was not an institution, it was a general agreement.
It was a general agreement on tariffs and trade. They could only
launch a round to discuss and negotiate trade. The WTO is a trade
negotiation forum. We can do trade negotiation any time at the
World Trade Organisation, there is no need to go into a difficult
negotiation for a launching of a round and then to finish the
whole round. I am very hopeful that this round will end. People
keep saying that if there is no end to the round it will be devastating
for the WTO, but there will not be no end to the round because
every round has an end. You can end a round by coming to a compromise
solution. You always start with some level of ambition and by
negotiating you find a compromise solution. I hope that the compromise
in this round will not bring the level of ambition down too low.
This is why they have negotiated for so long, a lot of things
are on the table, particularly agriculture. This is the first
time we have agreed on the total elimination of export subsidies,
which is unprecedented. It was agreed in the July package in 2004,
before the Hong Kong meeting even. There are lots of things on
the table for this round to produce for the poor countries and
also for the advanced countries for the round to fail. I foresee
that there might have to be some heroic compromising effort around
the world to reach an agreement, because the complications are
not only in agriculture: the so-called NAMA also has great complications
because of the non-reciprocity treatment. There are more complications
in services. The first two are dealt with on the basis of formula,
the so-called Swiss formula, but the services negotiations are
dealt with on the basis of bilateral requests on offer. We have
a lot of moves and negotiations that are needed all round. Then
you have the rules negotiations. At the moment, while they are
discussing agriculture and NAMA, the rules have not started to
produce any concrete results at all. If you look at the anti-dumping
rules, they can take many months before they will finish it. My
suggestion in this report is if we have to manage a WTO with 160
or 180 members—because more countries will be joining the
WTO: when I was there there were 140, and now a few more have
joined and before too long there will be 160 or 170—it will
be unmanageable to finish any round created in the future. Any
round that is launched in the future might involve some areas
which are new to the WTO. For example, the new issues in this
round, which are trade and environment, in the next round, if
there is a post-Doha round might involve what I would call beyond-the-border
regulations. Normally the WTO is tasked only to deal with border
measures, customs measures, tariff measures, but not inside the
border, measures like the rules we are seeing now with the services
negotiations. In the future there will be more rules negotiations
inside the border, and this will complicate the issues. The intention
of this report is to request members and provoke members to discuss
the so-called variable geometry, meaning do we always need multilateral
solutions to all this, which is a perfect solution. First we must
go for multilateral solutions, and I still believe in multilateral
solutions, but there will be different areas which will become
very complicated for all members of the WTO to take the same commitment
at the same time, so plurilateral agreements exist under the WTO.
For example, the Financial Services Agreement that was concluded
in the 1990s is a plurilateral agreement. I do not know how many
are party to this, but it is not all 153, it is something like
100 countries. The Government Procurement Agreement is also a
plurilateral agreement, and not all countries are bound by it.
Based on our discussions with experts, we think that in the future
we may need to think more about maintaining multilateral processes,
but at the same time strengthening that with plurilateral processes
for some issues, while keeping the agreement open for those who
can join later. The second part of the concern on the WTO in the
future is the things I have just mentioned on the issues inside
the border. If you look at climate change which is being discussed
at the moment, too little has been said about its trade and development
impacts. People tend to say it will have some devastating impacts
on development if we do not take care of the level of water and
desertification and things like that, but the real impact when
it comes to the trading regime is on the trade rules. From time
to time that will be subsumed by the more globally accepted climate
rules. People are now beginning to talk about the measurement
of carbon footprints in the way you produce things. This is an
advanced process, but surely at some time in the future people
will think about this. Some countries have already adopted climate
policies as a way to inhibit trade. Eco-miles, for example, that
has been raised by some farm associations in Europe, has criticised
the importation of flowers from Kenya and Uganda because they
say you have to fly the flowers all the way from Kenya and Uganda,
whereas the WTO has proof that flowers produced in a greenhouse
in Europe produce more carbon dioxide than flowers flown all the
way from Kenya and Uganda. The WTO has to get engaged in this
discussion, and in the future I see that particularly on climate
policy and trade there will be a lot of difficult soul-searching
exercises with the WTO, so we will have to prepare for that as
well. The third problem is on dispute settlement, which you have
also referred to. With the increase in competitiveness and the
intensity of competition around the world there will be more disputes
anyway. Without the Trade Round there would probably be even more
disputes in different areas. The disputes that are coming are
going to be in different kinds of areas. At the moment we are
seeing some of the non-tariff barriers, anti-dumping activities,
genetically modified products. There will be a lot of issues that
will have to fall back on more scientific confirmation and research
which will become very intractable for the WTO and it is getting
to be very complicated. My concern for the future of the WTO is
that we should not stray too far with the WTO into too many areas
at the same time. The best is to keep the responsibility in the
well-defined areas that they are operating in and be very cautious
and prudent when we allow more negotiations to proliferate.
Q407 Lord Maclennan of Rogart: Just
one quick supplementary on your first point about plurilateral
as opposed to multilateral. Would you envisage that the WTO would
have to have rules, and, if so, what kind, to protect those who
did not sign up from bullying or to identify harm that was unacceptable
to the non-participating members?
Dr Supachai: At the moment under the
so-called Special and Differential Treatment negotiations there
would be some agreements that would be subject to different sequencing
of implementation anyway. Different sequencing should mean that
those who are not capable at the moment of committing themselves
should be assisted. That is why Aid for Trade and UNCTAD's work
come into the picture. We have always said in various issues,
in part of the so-called Singapore issues, investment rules, competition
rules, these are things that UNCTAD has been doing all along.
UNCTAD has been doing a lot of work on competition rules and investment.
When you prepare countries to go into some legalistic obligations
you cannot force them to do so without the right kind of preparation.
This is something that we should do if we have plurilateral agreements,
and UNCTAD is always around to do that, although we need more
contributions from the donors to be able to perform all of this.
Q408 Lord Woolmer of Leeds: You said
that all rounds come to an end eventually and you hope that the
agreement this time, if it comes to an agreement, would not be
so small and modest that it really achieved nothing. In your view,
what would be the key elements of an acceptable package or outcome
for the current round?
Dr Supachai: You pose a very good but
very difficult question to answer.
Q409 Lord Woolmer of Leeds: Just
the main heads.
Dr Supachai: I think the key is agriculture.
I was talking about rules, manufacturing and services, but the
key is still agriculture. Although I have always said this is
a balanced round, it is a round for all things together and not
only agriculture, the key to unlocking it—the lynchpin—is
agriculture. You need to have a decent agreement on agriculture.
The kinds of proposals that are on the table at the moment on
agriculture come very close to what I would call the Swiss formula,
that for the highest level of tariffs you have the highest level
of reduction, and you go down the ladder like that. To have a
full elimination of export subsidies, all the amber box, try to
limit the blue box that will not have a price distortion but help
to support producers, and also try to agree on the escape clause.
All the clauses that would give special products, sensitive products,
SSM—the Special Safeguard Mechanism—we must try to
treat them in a way that does not give countries the leeway to
escape commitments. At the moment you can agree on the Swiss formula,
subsidy reduction, but there are many escape clauses in this because
a lot of countries cannot stand the full competition on agriculture.
There will be a series of discussions on special products, sensitive
products, SSM, SSP: many of them are on the cards now, and the
final agreement would be the whole package together, and the key
is agriculture.
Q410 Lord Woolmer of Leeds: Equally
succinctly, what could stop that being agreed? Is it what is secured
in the other areas? Is there enough to give in the other areas
to agree a package?
Dr Supachai: In my own experience, if
you have the bulk on agriculture agreed upon then people can move
on NAMA, manufacturing. On services they do not set a very high
bar anyway. On the rules, fisheries will be a problem still, but
there are some proposals so people can move forward. Anti-dumping
is probably a US issue. If the US finds in agriculture, NAMA and
services that they can achieve enough they will give in. I still
think agriculture is the key and other topics, other issues, will
come along. The problem at the moment is even among the G20 countries
they do not have all of their differences reconciled, because
the G33 is another group of countries, including particularly
the European countries, that would like to emphasise the Special
and Differential Treatment, the escape clauses. Even among European
countries they have net food-exporting countries and net food-importing
countries. The key to unlocking, and for the developing countries
to be united is for them to revisit the issue of support to be
given to the net food-importing countries, and also in the light
of the current food crisis. I remember in the Marrakech Agreement
at the end of the Uruguay Round we put in one clause that when
this round ends and food prices increase, we must put in a special
package to assist the net food-importing countries. This will
be a major problem for this round because the food price increases
this time will be a secular increase, not a short-term increase.
If this round ends in a way where we have a lot of reductions
on distortions, there will be a push on food prices, so there
is a great need for funds to assist net food-importing countries.
Chairman: Thank you very much indeed, that was
extremely helpful. Thank you for staying with us, we are most
grateful to you for coming.
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